0 ~ 


The  Virginian  Railway 

Traffic  Development 

and 

Operating  Economies 


The  information  contained  in  this  pamphlet,  although  not 
guaranteed,  is  derived  from  sources  which 
we  regard  as  reliable 


The  National  City  Company 

National  City  Bank  Building 
New  York 


July  1917 


The  National  City  Company 

National  City  Bank  Building 
New  York 


CORRESPONDENT  OFFICES 


PHILADELPHIA,  PA. 

1421  Chestnut  Street 

BOSTON,  MASS. 

10  State  Street 

PITTSBURGH,  PA. 

Farmers  Bank  Bldg. 

ALBANY,  N.  Y. 
Douw  Building 

WILKESBARRE,  PA. 
Miners  Bank  Building 

ATLANTA,  GA. 

Trust  Co.  of  Georgia  Bldg. 

PORTLAND,  ORE. 
Railway  Exch.  Bldg. 

KANSAS  CITY,  MO. 

Republic  Building 

CHICAGO,  ILL. 

137  So.  La  Salle  St. 

SAN  FRANCISCO,  CAL. 
424  California  Street 

CLEVELAND,  O. 
Guardian  Bldg. 

DETROIT,  MICH. 
Dime  Bank  Bldg. 

MINNEAPOLIS,  MINN. 
McKnight  Bldg. 

WASHINGTON,  D.  C. 
741  15th  St.  N.  W. 

ST.  LOUIS,  MO. 

Bank  of  Commerce  Bldg. 

DENVER,  COL. 

First  Nat  l Bank  Bldg. 

BALTIMORE,  MD. 

Munsey  Building 

BUFFALO,  N.  Y. 

Marine  Bank  Bldg. 

SEATTLE,  WASH. 

Hoge  Building 

LOS  ANGELES,  CAL. 

Hibernian  Building 

LONDON,  ENG.,  3 Lombard  Street 


2>SW2> 


i/7 

(d 

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CM 


Table  of  Contents. 


Page 


Origin  of  the  Road 5 

Capital  Readjustment  in  1912 6 

Interest  of  the  H.  H.  Rogers’  Estate 6 

Bonds  sold  since  1912 7 

Capitalization,  present  amount  outstanding 7 

Total  Operating  Revenues,  1910-1916 . 7 

Income  Available  for  Interest  on  Funded  Debt,  1910-1916 7 

Interest  \On  Funded  Debt,  1910-1916...  ... 7 

Description  of  Road,  Equipment  and  Terminal  Facilities 9 

Security  of  First  Mortgage  Bonds 15 

Cash  Cost  of  Property 15 

Price  Range  of  First  Mortgage  Bonds 15 

Growing  Demand  for  West  Virginia  Coal 16 

Market  for  New  River  and  Pocahontas  Coal 17 

Coal  Reserves  Along  the  Virginian 19 

Importance  of  Coal  Traffic 19 

Operating  Advantages  over  Competitors 21 

Growth  of  Coal  and  Coke  Traffic 22 

Industrial  Development  Along  the  Virginian 23 

Operating  Performances  23 

Average  Tractive  Power  of  Freight  Locomotives 25 

Average  Revenue  Freight  Train  Load 25 

Revenue  Ton-Miles  per  Freight  Locomotive-Mile 25 

Average  Car  Load  per  Loaded  Car 25 

Average  Car  Load  per  Loaded  and  Empty  Car 25 

Average  Haul  per  Ton 26 

Revenue  per  Ton  Hauled 26 

Revenue  per  Freight  Train-Mile 26 

Ratio  of  Operating  Expenses  to  Total  Operating  Revenues 26 

Cost  of  Conducting  Transportation 26 

Ton-Mile  Costs  27 

Growth  of  Freight  Traffic  Density,  1910-1916 27 

Growth  of  Per  Mile  Earnings,  1910-1916 28 

Conclusion  29 


Supplementary — Mortgage  Restrictions  Regarding  Future  Issues..  29 


n 49953 


Locomotive  used  ou  the  Virginian  Railway.  The  two  sets  of  drivers  give  virtually  two  locomotives  iu  tandem. 
Heavier  engines  of  this  type  are  iu  use  aud  under  coustructiou  for  the  road. 


The  Virginian  Railway 


Several  years  ago  the  late  H.  H.  Rogers,  Standard 
Oil  millionaire,  conceived  the  idea  of  opening  up  the  rich 
coal  deposits  of  the  New  River  and  Pocahontas  fields  of 
West  Virginia  by  building  a north  and  south  railroad 
which  would  link  together  the  Chesapeake  & Ohio  and 
the  Norfolk  & Western.  His  plan  was  to  build  a road 
of  superior  construction  tapping  these  richest  of  all  coal 
fields,  and  offer  it  for  sale  to  one  of  the  two  roads  men- 
tioned. Construction  was  started  almost  immediately  and 
carried  on  until  practically  all  of  the  present  Virginian 
Railway  in  the  State  of  West  Virginia  had  been  com- 
pleted. About  this  time  several  Government  suits  against 
the  coal  roads  were  impending  and  it  was  thought  that 
neither  the  Chesapeake  & Ohio  nor  the  Norfolk  & West- 
ern would  care  to  acquire  new  properties  at  the  risk  of 
being  drawn  into  litigation.  It,  therefore,  appeared  that 
if  the  proposition  were  not  projected  on  a large  scale, 
complete  failure  would  result. 

Mr.  Rogers,  although  deprived  of  the  financial  assist- 
ance of  his  friends  and  business  associates,  who  declared 
the  scheme  unfeasible  and  doomed  to  failure,  undertook 
to  furnish  the  most  perfect  possible  transportation 
machine  to  bring  these  coals  to  the  seaboard  at  as  low  a 
ton-mile  cost  at  least  as  the  Chesapeake  & Ohio  and  Nor- 
folk & Western.  More  than  5,000  miles  of  exploration 
surveys  were  made  before  the  347  miles  of  low  grade  line 


5 


were  finally  selected  between  Sewalls  Point  on  Hampton 
Roads  and  the  gathering  yards  at  Princeton,  and  the  best 
possible  location  was  finally  secured  and  used.  Mr. 
Roger’s  extraordinary  vision  and  keen  ability  to  analyze 
changing  conditions  made  possible  the  planning  and 
building  of  the  Virginian  Railway. 

So  great  was  Mr.  Rogers’  faith  in  the  undertaking  that 
he  drew  solely  upon  his  own  private  fortune  to  carry  on 
the  construction,  until  1907  when  he  was  compelled  to 
negotiate  loans  secured  principally  by  pledge  of  his  own 
personal  collateral.  In  this  year  $10,000,000  6%  Notes 
of  the  Tidewater  Company  (the  construction  company) 
were  issued.  They  matured  in  1909,  but  were  mostly  ex- 
changed for  a new  issue  of  $17,000,000  Convertible  6% 
Gold  Notes  due  June  1,  1913,  which  were  secured  by 
$34,800,000  Virginian  Railway  First  Mortgage  5% 
Bonds  and  other  collateral. 

In  the  Spring  of  1912  the  capitalization  of  the  Vir- 
ginian Railway  Company  was  readjusted.  The  Converti- 
ble 6%  Notes  were  called  for  payment  June  1,  1912,  at 
101  and  interest,  the  mortgage  securing  the  $34,800,000 
First  Mortgage  5’s  was  canceled  and  an  issue  of  $25,- 
000,000,  of  a total  authorized  issue  of  $75,000,000,  new 
First  Mortgage  Fifty-Year  5%  Gold  Bonds,  Series  “A,” 
due  May  1,  1962,  was  sold  to  a banking  syndicate  who  in 
turn  offered  them  to  the  public  at  99  and  accrued  interest. 

This  readjustment  of  capitalization  was  effected  in 
order  to  strip  the  Virginian  of  corporate  technicalities 
involving  its  inter-relations  with  Mr.  Rogers’  Estate  and 
the  Tidewater  Company. 

By  accepting  new  Preferred  Stock  for  its  claims,  the 
Estate  ceased  to  be  a creditor  of  the  road,  whose  bonded 
debt  was  transferred  to  the  public.  The  Rogers’  inter- 
ests retain  the  proprietorship  by  owning  directly,  or  indi- 


6 


rectly  through  the  Tidewater  Company,  practically  all 
the  $27,955,000  Preferred  and  $31,271,500  Common 
Stocks. 

The  actual  cash  cost  of  the  property  at  the  time  of  the 
capital  readjustment  had  been  over  $50,000,000,  against 
which  only  $25,000,000  of  the  new  First  Mortgage  5’s 
and  $2,400,000  Equipment  Trust  Certificates  were  issued, 
the  Preferred  Stock  fairly  representing  the  cash  invest- 
ment of  the  Rogers’  interests. 

In  February,  1914,  $2,000,000  additional  First  Mort- 
gage Bonds  were  marketed  at  99^2  and  interest.  In  Janu- 
ary, 1916,  the  last  issue  of  $2,500,000  was  marketed  at 
98^4  and  interest. 

The  present  outstanding  capitalization  of  the  Vir- 
ginian is  as  follows : 


Preferred  Stock  $27,955,000 

Common  Stock  31,271,500 

First  Mortgage  5’s  due  May  1,  1962 29,500,000 

^Equipment  Trust  5’s,  Series  “A” 562,000 


^Mature  $188,000  each  May  1 and  $i87,ooo  each  November  1. 


Earnings. 

The  gross  earnings  and  income  available  for  interest 
on  the  Company’s  funded  debt  after  all  other  deductions 
since  the  first  year  of  operation  have  been  as  follows: 


Total 

Available 

Interest 

Number 

Years  ended 

Operating 

for  Interest 

on  Total 

Times 

June  30: 

Revenues 

on  Funded  Debt 

Funded  Debt 

Earned 

1910 

. . $2,063,190 

$ 204,209 

$1,885,675 

O.II 

1911 

. . 3,671,224 

939,464 

2,052,819 

0.46 

1912 

• • +,837,598 

1,263,124 

2,011,525 

0.63 

*913 

. . 5,842,584 

2,382,485 

+ 1,364,050 

i-75 

1914. 

• • 6,340,079 

2,641,049 

1,380,196 

1.92 

I9I5 

5,820,406 

2,164,471 

1,426,550 

1.52 

1916 

■ • 7,390,381 

3,331,957 

1,463,703 

2.28 

*1916 

• • 8,455,964 

3,996,134 

1,516,828 

2.63 

^Calendar  year. 

^Decrease 

in  interest  charges  the  result  of  ca 

pital  readjustment 

in  1912. 

7 


General  view  of  Sewalls’  Point  coal  unloading  pier  from  the  shore.  At  the  left  is  the  pier  proper  with  its  incline-approach. 
To  the  right  is  the  car  dumper  emptying  a railroad  car  into  one  of  the  pier  cars. 


The  average  annual  growth  of  total  operating  revenues 
since  1910  has  been  over  26%,  and  the  average  annual 
increase  of  income  available  for  interest  on  the  funded 
debt  over  85%.  The  remarkable  development  of  tonnage 
coupled  with  the  highest  degree  of  operating  efficiency 
and  a reduction  of  fixed  interest  charges  have  enabled  the 
Virginian  to  earn  the  interest  charges  on  its  funded  obli- 
gations 2.63  times  in  the  calendar  year  1916,  compared 
with  little  over  i/ioth  times  in  1910.  In  1916  it  earned 
8.86%  on  its  $27,955,000  Preferred  Stock. 

As  long  as  there  exists  a demand  for  the  highest  grade 
bituminous  coal  from  Atlantic  seaports , New  River  and 
Pocahontas  coal  tonnage  will  be  the  first  to  move.  With 
practically  unlimited  tonnage  of  this  coal  along  its  lines, 
and  with  the  most  efficient  means  of  transporting  it  to  the 
seaboard  of  any  railroad  on  the  Atlantic  Coast,  the 
Virginian  is  assured  a steady  and  rapid  growth  of  traffic. 

Description  of  the  Property. 

The  property,  as  it  exists  today,  consists  of  441  miles 
of  main  line  extending  south  from  Deepwater,  on  the 
Kanawha  River,  W.  Va.,  a distance  of  about  85  miles 
through  the  Kanawha,  New  River  and  Pocahontas  coal 
fields,  to  the  gathering  yards  at  Princeton,  thence  east  to 
Sewalls  Point  on  Hampton  Roads  beyond  Norfolk,  Va.; 
35  miles  of  branch  lines  in  the  coal  fields,  248  miles  of 
sidings  and  other  track,  and  a coal  loading  pier  at  Sewalls 
Point.  The  Virginian  operates  34  miles  additional, 
partly  under  lease  and  partly  under  trackage  rights,  in- 
cluding entrance  into  the  passenger  terminal  at  Norfolk, 
which  it  owns  jointly  with  the  Norfolk  & Western  and 
Norfolk  Southern.  The  grades  eastbound  from  the 
assembling  yards  at  Princeton,  W.  Va.,  to  Sewalls  Point, 
a distance  of  347  miles,  were  established  at  0.2  of  1% 


9 


Portion  of  main  line  at  Eggleston,  Virginia,  309  miles  from  Sewalls’  Point. 


with  a short  pusher  grade  out  of  Princeton  yard  and  a 
9-mile  pusher  grade  over  Allegheny  Mountain  where  the 
grade  is  but  0.6  of  1%.  This  line  is  practically  a gravity 
road  in  the  direction  of  heavy  traffic  movement.  The 
main  line  rails  are  of  85  and  100  pound  steel,  laid  upon 
white  oak  ties,  and  ballasted  throughout.  The  bridges  and 
trestles  are  of  heavy  steel  and  in  the  case  of  the  more  im- 
portant ones  provision  has  been  made  for  double  tracking. 


On  December  31,  1916,  the  Virginian  had  the  follow- 
ing equipment  in  service : 


Average  Tractive 

Total  T ractive 

Locomotives  in  Freight  Service: 

Power  (Pounds) 

Power  (Pounds) 

8 Consolidation  

29,400 

235,200 

6 Mikado  

45,200 

271,200 

42  “ 

56,000 

2,352,000 

18  “ 

1,094,400 

4 Mallet  

279,600 

8 “ 

88,900 

711,200 

1 “ 

102,100 

6 “ 

115,000 

690,000 

5 Switch  

226,000 

98 

60,833 

5,961,700 

Car  Capacity 

Total  Capacity 

Cars  in  Freight  Service: 

(Pounds) 

(Tons) 

547  Box  

21,880 

861  Stock  

80,000 

34,440 

174  Flat  

6,960 

2,989  Flat  Bottom  Gondolas... 

100,000 

149,450 

997  “ 

54,835 

147  Hopper  Coal  

7,350 

2,192  Hopper  Steel  Coal 

109,600 

7,907 

97.259 

384.515 

Other  Equipment: 

10  Passenger  Train  Locomotives 
46  “ “ Cars 

133  Work  Train  Units 
4 Barges 


A large  majority  of  the  freight  locomotives  and  all  the 
coal  cars  are  of  the  heaviest  modern  type,  the  cars  being 
of  50  and  55-ton  capacity. 


11 


The  outshore  end  of  coal  pier  showing  adjustable  chutes  and  two  conveyor  cars.  The  unloading  is  done  by  the  Company 

at  the  expense  of  the  shipper  or  consignee. 


The  Tidewater  terminal  property,  which  cost  practic- 
ally $3,000,000,  comprises  6n  acres  of  valuable  water 
front  on  Hampton  Roads,  and  a modern  steel  pier  1,040 
feet  long,  on  concrete  foundations,  with  provision  for 
loading  coal  into  ships  on  both  sides  of  the  pier.  This 
pier  embodies  the  very  latest  improvements  of  ocean  and 
lake  development.  It  is  operated  by  electricity  and  has  a 
loading  capacity  of  1,500  net  tons  per  hour,  or  36,000 
tons  in  24  hours,  and  this  capacity  has  been  exceeded  in 
actual  practice.  Four  of  the  largest  vessels  can  be 
berthed  at  one  time.  Accommodations  for  vessels  draw- 
ing 30  feet  of  water  are  available  on  both  sides  of  the  pier 
at  low  tide.  The  Virginian’s  tidewater  terminal  is  located 
about  5 miles  nearer  the  ocean  highway  than  that  of  the 
Norfolk  & Western  at  Lambert’s  Point  and  about  6 miles 
nearer  than  that  of  the  Chesapeake  & Ohio  at  Newport 
News.  This  is  a decided  advantage  in  point  of  time  con- 
sumed between  the  arrival  and  departure  of  coal-carrying 
vessels. 

A broad  policy  has  obtained  in  the  purchase  of  prop- 
erty at  those  points  where  additional  facilities  will  be 
required  for  the  future  development  and  extension  of  the 
Virginian  Railway,  or  where  it  may  be  advisable  to  estab- 
lish joint  railroad  and  commercial  interchange  facilities; 
also  at  those  points  where  the  natural  resources  indicate 
a demand  at  an  early  date  for  industrial  sites  and  accom- 
modations. To  provide  for  this  over  1,282  acres  of 
real  estate  have  been  purchased  at  the  following  points : 


Sewalls  Point  611  acres 

Norfolk  City 11.4  “ 

Southern  Branch  Yard 67  “ 

Victoria  69  “ 

Roanoke  72  “ 

Kellysville 24  “ 

Princeton  420  “ 

Deepwater  7.7  “ 


13 


Rlack  Lick  Viaduct,  West  Virginia.  The  highest  trestle  on  the  road  (207  ft.) 


Security  of  the  First  Mortgage  Bonds. 

The  Virginian  First  Mortgage  5’s  are  secured  by  direct 
first  mortgage  on  the  entire  road  owned  and  all  the 
equipment  except  that  portion  upon  which  $562,000 
Equipment  Trusts,  maturing  serially  1917-1918,  have  a 
first  lien;  and  by  first  collateral  lien,  through  pledge  of 
all  the  bonds  and  capital  stock  (except  Directors’  Shares) 
of  The  Virginian  Terminal  Railway  Company,  upon  the 
coal  loading  pier  and  terminal  property  at  Sewalls  Point. 
After  deducting  the  net  cost  of  equipment  and  tidewater 
terminal  property  under  the  mortgage,  the  $29,500,000 
First  Mortgage  Bonds  are  outstanding  at  the  rate  of  only 
$36,400  per  mile.  The  cash  cost  of  the  property  has  been 
over  $54,500,000,  or  over  $25,000,000  in  excess  of  the 
par  value  of  these  bonds  outstanding. 

Price  Range  of  These  Bonds. 

The  following  table  shows  the  average  price  of  the 
bonds  as  compared  with  the  surplus  earnings  and  the  ac- 
cumulated profit  and  loss  surplus  : 


Average 

Surplus 

Profit  and 

Price 

Earnings 

Loss  Surplus 

Fiscal 

Vear  1913 

98.05 

$1,018,435 

$ 928,341 

1914 

98.54 

1,260,853 

2,142,73  7 

1915 

96.53 

737,92i 

3,590,176 

“ 1916 

96.67 

1,868,254 

5,510,742 

Calendar 

“ 1916 

98.53 

2,479,306 

6,661,920 

Railroad  credit  is  determined  largely  by  railroad  earn- 
ings. The  present  price  of  these  bonds  (about  94)  in  no 
way  reflects  declining  credit,  inasmuch  as  they  sold  as  high 
as  100 ]/2  in  February,  1914,  when  the  surplus  earnings 
were  only  one-half  as  much  as  they  were  in  the  calendar 
year  1916,  and  current  earnings  are  the  greatest  in  the 
history  of  the  Company.  Although  the  bonds  are  selling 
below  normal,  due  to  general  outside  conditions,  the 


15 


credit  of  the  Company  has  been  steadily  improving,  and 
likewise  the  security  behind  the  bonds  increasing,  as  will 
be  seen  from  the  foregoing  table. 

A detailed  analysis  of  the  traffic  development  and 
operating  performances  of  the  Virginian,  as  compared 
with  other  roads,  is  shown  on  pages  23  to  28. 

In  order  to  show  that  the  Virginian  Railway,  through 
its  actual  operating  performances,  has  not  only  measured 
up  to,  but  exceeded  the  highest  expectations  and  vindicated 
the  judgment  of  its  sponsors,  it  is  well  to  have  in  mind 
a brief  outline  of  the  conditions  which  led  up  to  the 
building  of  the  road,  namely,  the  growing  importance  of 
the  coal  industry,  the  demand  for  West  Virginia  coal  and 
the  inadequate  transportation  facilities  existing  in  this 
field  prior  to  the  completion  of  the  new  road. 

Growing  Demand  for  West  Virginia  Goal. 

The  coal  consumption  per  capita  in  the  United  States 
has  grown  from  0.278  tons  in  1850  to  5.250  tons  in 
1910,  an  increase  of  1788%,  whereas  the  population 
increased  only  230%  during  that  period.  During  the 
twenty  years  ended  1910,  the  annual  production  of  an- 
thracite coal  increased  from  about  46,000,000  net  tons 
to  about  84,000,000  net  tons,  or  82%,  whereas  during 
the  same  period  the  annual  production  of  bituminous  coal 
increased  from  about  1 1 1,000,000  net  tons  to  about  417,- 
000,000  net  tons,  or  275%. 

The  four  largest  bituminous  coal  producing  states  are, 
in  order  of  their  importance,  Pennsylvania,  West  Vir- 
ginia, Illinois  and  Ohio,  all  of  which,  except  Illinois,  are 
in  the  Appalachian  Field,  which  produces  over  70%  of  the 
coal  mined  in  the  United  States.  During  each  of  the  two 
decades  ended  1900  and  1910,  Pennsylvania,  Illinios  and 
Ohio  nearly  doubled  their  output,  whereas  W est  Virginia 
practically  trebled  its  output. 


16 


Mr.  E.  W.  Parker,  Statistician  of  the  U.  S.  Geological 
Survey,  in  his  report  entitled  “The  Production  of  Coal,” 
states  that  the  Pocahontas  and  New  River  coals  of  West 
Virginia  are  the  best  and  cheapest  in  the  United  States. 
By  reason  of  the  thickness  and  wide  distribution  of  the 
veins,  the  bituminous  coal  in  these  fields  contributes  a 
vast  reservoir  of  railway  traffic. 

The  factories,  steam  railroads,  electric  railway  and 
electric  light  and  power  stations  of  the  Eastern  and  Mid- 
dle States  and  coastwise  and  maritime  commerce  of  the 
Atlantic  seaboard  demand  enormous  quantities  of  this 
high-grade  coal,  delivered  (as  far  as  possible)  by  water 
transportation.  The  rapidly  growing  needs  for  “high 
fuel  value”  coal  for  export  to  foreign  countries  is  another 
important  factor  to  be  considered  as  an  added  stimulus  to 
the  demands  upon  the  West  Virginia  fields.  Apart  from 
the  fuel  value  of  New  River  and  Pocahontas  coals,  the 
carriage  by  sea  from  Hampton  Roads  (second  only  to 
New  York  harbor  upon  the  Atlantic  Coast  in  port  facili- 
ties) to  Boston  and  other  New  England  ports  and  to 
New  York,  Philadelphia,  Baltimore  and  abroad,  is  a 
highly  favorable  feature  giving  preference  to  these  coals 
from  West  Virginia  over  all-rail  (that  is,  higher  price) 
fuels  from  other  fields. 

The  coal  lands  in  a wide  strip  of  territory  in  the  heart 
of  the  New  River  and  Pocahontas  fields  lay  idle  for  many 
years  because  of  inadequate  transportation  facilities. 
The  vastness  of  the  coal  supply  in  mines  already  in  opera- 
tion, the  development  of  entirely  new  mines,  and  the 
increasing  demand  for  means  of  moving  the  supply,  justi- 
fied improved  transportation  facilities.  The  operators 
of  existing  mines  and  the  projectors  of  new  ones  found 
existing  highways  inadequate  to  keep  pace  with  their 
actual  and  prospective  shipments  to  the  growing  markets 
for  their  product. 


17 


An  8-foot  seam  of  clean  coal  exposed  in  cut  on  winding  gulf  branch  of  Virginian  Railway,  400  miles  from  tidewater. 


Coal  Reserves  Along  the  Virginian. 

Based  upon  a report  by  I.  C.  White,  State  Geologist 
of  West  Virginia,  the  tonnage  within  the  region  traversed 
by  the  Virginian,  its  connections  and  branches,  either 
built  or  projected,  is  estimated  at  20,000,000,000  net  tons. 
Of  this  amount  about  4,000,000,000  net  tons  are  tributary 
to  the  present  lines  and  the  balance,  or  16,000,000,000 
net  tons,  is  tributary  to  its  proposed  extensions.  If  the 
Virginian  secures  but  one-third  of  the  potential  tonnage 
along  its  existing  lines,  it  will  require  141  years  at  the 
annual  rate  of  10,000,000  net  tons  to  exhaust  the  veins 
now  considered  workable.  If  the  Virginian  secures  but 
one-third  of  the  potential  tonnage  along  its  present  and 
proposed  lines,  it  will  require  700  years  at  the  annual  rate 
of  10,000,000  net  tons  to  exhaust  the  veins  now  consid- 
ered workable. 

The  present  lines  of  the  Virginian  pass  through  and 
over  these  coal  measures  for  85  miles  from  Deepwater 
on  the  Kanawha  River  to  Rock  on  the  Bluestone,  along 
which  entire  distance  commercial  coal  is  accessible  to  the 
railway  either  above  or  below  ground.  The  development 
of  tonnage  on  this  line  depends  upon  the  bituminous  coal 
market  at  Atlantic  seaports,  and  the  Virginian’s  ability 
to  secure  a remunerative  portion  of  the  coal  traffic  by 
furnishing  adequate  means  of  transportation. 

Importance  of  Coal  Traffic. 

Coal  traffic  is  perhaps  as  remunerative  as  any  handled 
by  the  railroads.  As  handled  by  the  Virginian,  coal 
yields  1 Gy2  cents  per  car-mile,  as  compared  with  10  cents 
for  general  merchandise  on  other  roads.  Not  only  is 
this  a marked  advantage,  but  general  merchandise  is 
very  expensive  to  load  and  unload.  On  the  Virginian, 


19 


‘On  the  Virginian,  coal  is  loaded  by  the  shipper  and  the  facilities  are  provided  by  him.” 


coal  is  loaded  by  the  shipper  and  the  facilities  are  pro- 
vided by  him;  it  is  unloaded  by  the  Company  at  the 
expense  of  the  shipper  or  consignee. 

The  foundation  of  the  prosperity  of  the  Norfolk  & 
Western  Railroad  is  its  coal  and  coke  traffic.  In  the  year 
ended  June  30,  1916,  over  86%  of  the  Norfolk  & West- 
ern’s operating  revenues  was  derived  from  freight  traffic. 
About  72%  of  the  revenue  tonnage  carried  consisted  of 
coal  and  coke  alone. 

The  freight  traffic  revenue  of  the  Philadelphia  & Read- 
ing in  the  year  ended  June  30,  1916,  comprised  over  83% 
of  its  operating  revenues.  Over  5 1 % of  this  freight  reve- 
nue was  derived  from  coal  traffic  alone. 

In  the  year  ended  June  30,  1916,  over  81%  of  the 
operating  revenues  of  the  Chesapeake  & Ohio  consisted 
of  freight  revenues,  and  nearly  72%  of  the  freight  ton- 
nage consisted  of  coal  and  coke  traffic. 

Over  84%  of  the  Delaware  & Hudson’s  operating 
revenues  was  derived  from  freight  traffic  in  the  year 
ended  December  31,  1916.  Of  this  freight  revenue  over 
$2f,<  was  derived  from  the  transportation  of  coal  alone. 

Operating  Advantages  Over 
Competitors. 

There  are  three  reasons  of  prime  importance  why  the 
Virginian  can  render  more  efficient  service  than  its  com- 
petitors : 

1.  The  Virginian  was  constructed  with  lower  grades 
and  less  curvature  than  any  other  railway  traversing  the 
Appalachian  coal  fields.  It  is  practically  a gravity  road 
in  the  direction  of  heavy  traffic  movement  and  can  thus 
move  heavier  train  loads  at  a lower  cost  per  ton-mile  than 


21 


any  other  railroad  delivering  bituminous  coal  on  the  At- 
lantic seaboard. 

2.  The  fact  that  it  was  constructed  and  equipped  es- 
pecially for  the  carrying  of  coal  and  other  heavy  freights 
as  the  central  idea  enables  the  Virginian  to  devote  prac- 
tically its  entire  resources  and  energy  to  the  moving  of  its 
freight  without  the  congestion  ordinarily  resulting  from 
the  operation  of  numerous  passenger  and  express  trains. 

3.  The  Virginian’s  coal  tonnage  originates  on  its  own 
lines,  is  loaded  into  its  own  cars,  transported  over  its  own 
rails  and  delivered  to  vessels  at  tidewater  through  its 
own  terminals,  the  empty  cars  being  hauled  back  directly 
to  the  source  of  traffic.  Its  cars  do  not  move  beyond  its 
control  and  consequently  its  motive  power  and  rolling 
stock  may  be  kept  adequate  for  its  own  exclusive  business 
at  all  times.  It  is  thus  in  a position  to  give  to  the  coal  and 
other  “heavy  freight”  shippers  along  its  tracks,  branches 
and  connections,  ample  facilities  in  supply  of  equipment, 
as  well  as  rapid,  cheap  and  efficient  service  between  the 
mines  and  markets. 

Growth  of  Coal  and  Coke  Traffic. 

The  following  table  shows  the  remarkable  growth  of 
coal  and  coke  tonnage  on  the  Virginian  since  June  30, 
1910.  the  end  of  the  first  year’s  operation  between  the 
West  Virginia  coal  fields  and  Sewalls  Point: 


Coal  and  Coke 

Years  ended  Coal  and  Coke  All  Freight  Revenue  to  All 

June  30:  Net  Tons  Revenues  Revenues  Freight  Revenue 

1910  989,239  $1,152,046  $1,739,188  66.2% 

1911  2,154,939  2,590,673  3,307,017  78.3% 

1912  3,104,928  3,694,611  4,436,402  83.2% 

1913  3,777,602  4,511,475  5,350,848  84.3% 

19H 4,124,926  4,957,929  5,790,645’  85.6% 

1915  3,605,640  4,360,261  5,070,491  85.9% 

1916  +,729,091  5,7 1 5,25  3 6,497,994  87.9% 

*1916 5,512,912  6,633,224  7,469,622  88.8% 


^Calendar  vear. 


22 


From  June  30,  1910  to  1916  the  average  annual  in- 
crease of  the  Virginian’s  coal  and  coke  tonnage  was 
35.2%,  compared  with  11.8%  for  the  Norfolk  & West- 
ern and  10.2%  for  the  Chesapeake  & Ohio. 

The  location  of  new  industries  along  the  lines  of  the 
Virginian  has  been  steady  and  rapid.  On  June  30,  1910, 
the  Company  reported  152  industries.  From  that  time 
to  June  30,  1916,  the  Company  reported  284  addi- 
tional industries,  of  which  195  were  lumber,  planing  and 
saw  mills,  stave  factories  and  other  woodworking  estab- 
lishments; and  20  were  new  coal  industries.  Thus  the 
total  growth  in  number  of  new  industries  during  the 
period  was  over  186%. 

Operating  Efficiency. 

The  Virginian,  by  reason  of  its  low  curvature,  favor- 
able grades  and  superior  motive  power  equipment,  per- 
forms the  task  of  a giant.  It  is  a common  occurrence  for 
one  locomotive  to  haul  85  fifty-ton  cars  about  10%  over- 
loaded (4,675  tons  revenue  freight)  from  Princeton, 
W.  Va.,  to  Roanoke,  Va.,  97  miles;  and  100  cars  (5,500 
tons  revenue  freight)  from  Roanoke  to  tidewater,  250 
miles,  without  “breaking”  the  train,  and  requiring  only 
356  locomotive-miles  (including  helper  9 miles)  to  ac- 
complish the  task.  In  other  words,  on  such  hauls,  356 
loaded  revenue  freight  locomotive-miles  produce  1,828,- 
475  revenue  ton-miles  of  traffic  or  over  5,100  revenue 
ton-miles  per  loaded  revenue  freight  locomotive-mile. 
Based  upon  the  authority  of  a well  known  railroad  ex- 
pert, the  same  locomotive  can  perform  between  two  and 
three  times  the  service  on  the  Virginian  than  it  can  per- 
form on  the  lines  of  its  strongest  competitor. 

The  following  figures  based  upon  actual  performance 
of  road  locomotives  for  the  year  ended  December  31, 
1916,  show  the  superior  motive  power  and  train-load 


23 


With  a gravity  road  practically  all  the  way  from  the  gathering  yards  at  Princeton,  West  Virginia,  the  Virginian  hauls 
the  largest  average  train  loads  of  any  railroad  in  the  United  States. 


capacity  of  the  Virginian  compared  with  its  two  competi- 


tors,  the  Chesapeake  & Ohio  and  the  Norfolk  & Western, 

and  four  of  the  other 

“heaviest 

load  carriers”  in  the 

United  States : 

.vge.  Tractive 

A vge.  Revenue 

Revenue 

Power  of  Frt. 

Freight  Train 

Ton-Miles  per 

Locomotives 

Load  (Tons) 

Frt.  Loco.  Mile 

Pounds 

1916 

1916 

Virginian  

. 61,674 

1,583 

1,325 

Norfolk  & Western 

48,600 

979 

697 

Chesapeake  & Ohio 

. 46,614 

1,007 

891 

Pittsburgh  & Lake  Erie 

. 46,396 

i,436 

i,398 

Carolina,  Clinchfield  & Ohio  . 

60,305 

967 

706 

Duluth,  Missabe  & Northern. 

• 42,385 

L444 

1,363 

Bessemer  & Lake  Erie 

• 43*301 

1,202 

687 

*Road  locomotives  (excluding  switching)  in  revenue  freight  service. 


Herein  lies  one  of  the  Virginian’s  secrets  of  success. 
Equipped  with  freight  locomotives  having  an  average 
tractive  power  of  26.9%  more  than  the  Norfolk  & West- 
ern’s and  32.3%  more  than  the  Chesapeake  & Ohio’s,  and 
with  a gravity  road  practically  all  the  way , it  hauls  the 
largest  average  train  loads  of  any  railroad  in  the  United 
States.  In  fact  the  Virginian’s  train  loads  have  averaged 
the  highest  over  a period  of  several  years.  In  1916  its 
average  train  load  was  61.7%  greater  than  that  of  the 
Norfolk  & Western  and  57.2%  greater  than  that  of  the 
Chesapeake  & Ohio. 

The  average  car  load  per  loaded  car  and  per  loaded 
and  empty  car  on  the  Virginian  is  also  greater  even  than 
that  of  the  above  roads,  comparing  in  the  calendar  year 
1916  as  follows. 


Tons  Per 

Revenue  Freight  Car  Load  Loaded  Car 

Virginian  48.76 

Norfolk  & Western 33-94 

Chesapeake  & Ohio 34.10 


Tons  Per  Loaded 
and  Empty  Car 
25.51 
20.96 
21.40 


The  average  car  load  per  loaded  car  was  43.6% 
greater  than  that  of  the  Norfolk  & Western  and  42.9% 


greater  than  that  of  the  Chesapeake  & Ohio.  The  aver- 
age car  load  per  loaded  and  empty  car  was  22.2%  greater 
than  that  of  the  Norfolk  & Western  and  19.2%  greater 
than  that  of  the  Chesapeake  & Ohio. 

Big  tra  in  loads  with  a long  haul  and  minimum  locomo- 
tive mileage  mean  greater  earning  power.  The  Vir- 
ginian’s average  haul  in  1916  was  361.38  miles;  the  Nor- 
folk & Western’s  260.88  miles,  the  Chesapeake  & Ohio’s 
271.00.  Here  again  the  Virginian  enjoys  an  advantage 
over  these  roads. 

The  revenue  per  ton  of  revenue  freight  hauled  and  the 
revenue  per  freight  train-mile  for  these  three  roads  in 
1916  were  as  follows: 


Revenue 

Revenue 

Per  Ton 

Per  Freight 

Hauled 

Train-Mile 

Virginian  

$1.2259 

$5-37 1 1 

Norfolk  & Western 

1. ion 

41347 

Chesapeake  & Ohio 

3-8474 

The  Virginian’s  advantage  in  revenue  per  ton  hauled 
lies  in  the  longer  haul,  and  per  freight  train-mile  in  the 
larger  freight  train  load. 

The  ratios  of  total  operating  expenses  to  total  opera- 
ting revenues  of  the  Virginian,  Chesapeake  & Ohio,  and 
the  Norfolk  & Western  have  been  as  follows: 

5-Year  Average  Year  ended  Year  ended 
to  June  30,  1915  June  30,  1916  Dec.  31,  1916 


Virginian 58.46%  52.03%  50.75% 

Norfolk  & Western 65.31%  56.16%  56.36% 

Chesapeake  & Ohio 68.58%  65.90%  65.62% 


In  the  last  year  above,  the  “Cost  of  Conducting  Trans- 
portation” on  the  Virginian  amounted  to  21.19%  of 
its  total  operating  revenues,  whereas  the  same  item  for 


26 


the  Norfolk  & Western  and  the  Chesapeake  & Ohio 
amounted  to  24.86%  and  28.80%  respectively. 

The  measure  of  freight  efficiency  is  the  “ton-mile  cost,” 
or  the  cost  of  hauling  a ton  of  freight  one  mile.  The  ton- 
mile  costs  of  the  railroads  in  the  United  States  are  the 
lowest  in  the  world.  The  Virginian’s  ton-mile  costs  are, 
we  believe,  the  lowest  in  the  United  States. 

The  following  comparisons  based  on  performances  for 
the  calendar  year  1916  show  the  Virginian’s  superiority 
in  this  respect : 


Ton-Mile 

Virginian 

Cost  (cents) 

Advantage 

Virginian  

172 

Norfolk  & Western 

238 

27.8%  Lower 

Chesapeake  & Ohio 

253 

32-1%  “ 

Pittsburgh  & Lake  Erie 

377 

544%  “ 

Carolina,  Clinchfield  & Ohio 

320 

46.2%  “ 

Duluth,  Missabe  & Northern 

282 

39-i%  “ 

Bessemer  & Lake  Erie 

256 

32.8%  “ 

With  perhaps  the  exception  of  one  year  the  Virginian’s 
ton-mile  cost  of  operation  has  shown  a steady  decline 
since  1910.  This  in  itself  is  a tribute  to  the  highly 
efficient  operating  staff  of  the  Company. 

Growth  of  Freight  Traffic  Density. 

As  indicated  on  page  22,  there  has  been  a marked  in- 
dustrial growth  along  the  Company’s  lines.  With  oper- 
ating conditions  in  its  favor,  it  remains  for  the  Virginian 
to  continue  developing  its  freight  traffic  density.  The  unit 
of  freight  traffic  density  is  the  “ton-mile  per  mile  of  road 
operated.”  The  freight  traffic  density  of  any  railroad 
is  the  total  number  of  ton-miles  of  traffic  produced  per 
mile  of  road  operated  during  a given  year. 


27 


The  Virginian’s  progress  in  this  respect  has  been  re- 
markable, and  compares  with  that  of  its  neighboring 
trunk  lines  as  follows: 


Years  ended  Virginian  Norfolk  & Western  Chesapeake  & Ohio 

June  30:  (Ton-miles  per  mile  of  road  operated) 

1910  902,952  3,456,296  3,161,307 

1911  1,930,26  6 3,446,940  3,009,620 

1912  2,666,893  3,994,718  2,957,056 

*9*3  3,174,355  4,378,oi6  2,886,968 

i9J4  3,368,816  4,497,010  3,001,617 

*9*5  2,934,450  4,367,663  3,435,o6i 

!9l6  3,786,950  5,728,469  4,335,oi3 

Average  Annual 

Increase 32.3%  9-4%  5-9% 


In  the  calendar  year  1916  the  Virginian’s  freight  traffic 
density  was  4,338,103  ton-miles  per  mile  of  road  ope- 
rated, or  14.5%  greater  than  it  was  in  the  fiscal  year 
ended  June. 30. 


Growth  of  Per  Mile  Earnings. 


Years  ended 

June  30:  Virginian  Norfolk  & Western  Chesapeake  & Ohio 

1910 $ 4,604  $18,027  $ 1 5,43 9 

I9H 7,735  18,031  i'5',247 

1912  10,193  19,766  14,479 

1913  11,896  21,623  14,406 

1914  12,604  21,931  14,906 

1915  h,558  21,052  15,610 

1916  14,643  27,829  18,978 

Average  Annual 

Increase 23.5%  8.1%  3-8% 


The  total  operating  revenues  of  the  Virginian  in  the 
calendar  year  1916  were  $16,660  per  mile,  an  increase  of 
13.7%  over  those  for  the  fiscal  year  ended  June  30. 

The  other  roads  shown  in  foregoing  tables  were  se- 
lected with  a view  of  comparing  the  Virginian’s  perform- 
ance with  efficient  trunk  lines  operating  in  similar  terri- 
tory, viz.,  the  Norfolk  & Western  and  the  Chesapeake  & 
Ohio;  and  with  other  “heavy  load”  carriers  having  low 
operating  ratios.  Like  the  Virginian  all  are  essentially 


28 


“freight  roads,”  their  freight  revenues  comprising  from 
80  to  94%  of  their  total  operating  revenues. 

Conclusion. 

The  extraordinary  increases  in  freight  traffic  density 
and  per  mile  earnings  demonstrate  ability  to  “get  busi- 
ness.” 

The  operating  comparisons,  we  believe,  cannot  fail 
to  convince  one  that  the  Virginian  is  no  longer  merely  a 
“road  with  a future,”  but  a road  which  has  made  more 
than  substantial  progress  in  its  comparatively  short  period 
of  existence,  and  a road  which  will  continue  to  maintain 
its  standard  of  operating  efficiency  among  the  leading 
freight  carriers  of  the  country. 


Supplementary. 

Additional  bonds  may  be  issued  under  the  First  Mort- 
gage for  the  following  purposes  : 

(a)  To  the  extent  of  $10,000,000  for  the  acquisition  of  stocks,  bonds  or 
other  obligations  of  other  corporations  owning  railroads  or  other 
transportation  lines  or  facilities,  or  terminals  or  terminal  facilities, 
which  in  effect  afford  extensions  of  the  Railway  Company’s  sys- 
tem; such  issue  is,  however,  limited  to  75 % of  the  actual  cost  of 
such  bonds,  stocks  or  other  obligations,  except  in  respect  of  The 
Virginian  Terminal  Railway  Company  or  of  any  Company  owning 
a bridge  connecting  the  railway  line  of  the  Railway  Company  with 
that  of  any  other  Company. 

(b)  For  additions  to  and  improvements  of  the  Railway  Company’s 
railway  and  other  property,  but  not  exceeding  75%  of  the  actual 
cost  thereof. 

(c)  For  the  construction  or  acquisition  by  the  Railway  Company  sub- 
sequent to  May  1,  1912,  of  single  track  extensions  of  the  main  line 
of  the  Railway  Company  at  the  actual  cost  thereof,  but  not  ex- 
ceeding an  average  rate  of  $75,000  per  mile;  and  for  single  track 
branch  lines,  and  for  second  track  not  less  than  five  miles  in 
length,  at  the  actual  cost  thereof,  but  not  exceeding  an  average 
rate  of  $50,000  per  mile  except  in  the  case  of  a railway  bridge  and 
its  approaches. 


29 


